Street Numbed to Lucent Fiber Talk

Is it a case of the company that cried "fiber"?

After more reports that Lucent Technologies Inc. (NYSE: LU) is close to signing a deal to sell its optical fiber division for roughly $2.75 billion, Wall Street seemed unenthusiastic.

In early afternoon, Lucent stock was trading down 0.16 (2.10%) to 7.45.

Last week, Light Reading reported that Lucent was entertaining several deals in the $3 billion range, and that it was expected to close the deal in the coming weeks -- possibly before the company's earnings call tomorrow (see Is Lucifer in Lucent's Debt Details? ). The company is under pressure to sell at least $2 billion in assets in order to meet bank requirements for spinning out shares of Agere Systems (NYSE: AGR).

Lucent officials said work is still being done on potential deals.

"Negotiations with multiple parties for our optical fiber business continue," said a Lucent spokeswoman when reached for comment on Monday afternoon.

Skeptics point to the fact that several months ago the company passed on an offer for division for $5 billion -- and that the price has steadily declined since then.

"The numbers are absurdly low," says one hedge-fund manager who asked not to be named, referring to deals he had heard of in the $2.75 billion range. "This is a company that earlier turned down a deal to sell for $5 billion."

The fund manager said that sources close to Lucent told him that several deals were still in the works, and that management was in the process of picking the best one.

Lucent's optical fiber division has been the object of many suitors' attentions. Light Reading first reported on a potential deal for the optical fiber division last March, when Corning Inc. (NYSE: GLW) was kicking the tires (see Corning and Lucent May Reach Deal). Later, companies such as Alcatel SA (NYSE: ALA; Paris: CGEP:PA), JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU), and Pirelli SpA emerged as potential dealmakers.

Later in the spring, when those companies failed to reach terms with Lucent, hopes shifted to potential dark-horse candidates, such as Japanese giants Furukawa Electric Co. Ltd. or Hitachi Ltd. (NYSE: HIT; Paris: PHA) (see Lucent's $5 Billion Question). At the same time, discussion over the optical fiber division led to general merger talks between Lucent and Alcatel, which were later abandoned (see Alcatel, Lucent Throw in the Towel).

— R. Scott Raynovich, Executive Editor, Light Reading
http://www.lightreading.com